Saturday, November 05, 2011
Mike Konczal demolishes the right-wing think tank Cato Institute for their unique brand of free-market capitalism: "I like this form of libertarianism, where policy is simply the things that defend the power and hierarchy of creditors, the rich and the elite, much better than the normal 'gee whiz markets are cool' kind. There’s almost a Nietzschean zeal for the wonk world to first and foremost accept creditors as a master class to whom all policy bends."
In this piece, Konczal is taking apart Cato's bank-friendly, consumer-hostile prescriptions for the housing market. Predictably, Cato wants to rush all the foreclosures to conclusion, never mind the fraudulent or nonexistent proof, and the banks should get deficiency judgments against people who strategically default. Public policy needs to be concerned about moral hazard you see...unless it is the banks who have the moral problems.
Thursday, November 03, 2011
Freddie and its larger sibling Fannie Mae face growing scrutiny as the government's cost of the 2008 takeovers mounts and the housing market faces prolonged weakness. The FHFA's inspector general, along with several lawmakers, have criticized several key decisions made by Freddie, Fannie and their regulator. Current and former employees have said that has led to a difficult work environment, where decision-making is often frustrated by second guessing. Last month, for example, the inspector general alleged that Freddie Mac had left money on the table when it agreed to a $1.3 billion settlement with Bank of America Corp. over faulty mortgages. It also issued a report criticizing the FHFA's decision to award multi-million-dollar pay packages to senior executives...Freddie Mac has taken nearly $52 billion in government aid to stay afloat, though for the past four quarters it has returned more money to the Treasury than it has taken. Fannie has cost taxpayers $89 billion. The firms own or guarantee nearly half of all U.S. home loans outstanding.
Fannie and Freddie have received over $140 billion from the taxpayers since they were placed in conservatorship. That was done, you will recall, after the debacle that ensued while they were privatized, when their CEO's tried to compete with a private mortgage securitization market that was in the process, we know know, of committing suicide. But the problems with the GSE's conduct these days are different. They are coddling the big banks and playing the hardest of hardball with struggling homeowners. Read Maureen Tkacik's two part series on this. See Jennifer Dixon's three-part series on how Fannie and Freddie are encouraging foreclosure in Detroit.
As part of Obama's pre-election shift to the ever-so-slightly left of center, he is trying to address criticisms that his housing policies have been a flop. Changes of leadership at the top might be part of that. But Tkakic thinks Ed DeMarco, the conservator of the GSE's, may be fired for his own sudden shift toward holding banks accountable. The putback litigation by the GSEs and a host of private investors in mortgage-backed securities could be a huge blow to Bank of America and perhaps other huge banks. B of A bought Countrywide, a company that engaged in horrifically shoddy securitization practices, and under the pooling and securitization agreements the remedy for their transgressions is forced buyback of the (now largely worthless) loans. The exposure is potentially in the hundreds of billions of dollars.
Compton's finances are in such disarray that the city amassed $369,000 in late fees over the last year because it could not pay its policing contract with the Los Angeles County Sheriff's Department on time. The city has already laid off about 15% of its workforce, and city leaders warn that more cuts may be on the way. City Hall has slashed spending, even canceling the city's popular gospel concert. But most disconcerting is the city's looming deficit of $39 million, a sum that represents about 80% of its annual general fund budget. Standard & Poor this summer lowered the rating of some of Compton's bonds to just above junk status. City officials said they're hoping for a short-term loan or line of credit to get through the year and vowed not to file for bankruptcy.
Short term loan? Can you imagine what the interest rate would be on that?
Wednesday, November 02, 2011
It is unusual to see any public official at any level demanding anything of banks, so Chicago Alderman Robert Fioretti has distinguished himself.
Looks like it's time to turn out the lights on Righthaven. The US Marshal for the District of Nevada has just been authorized by a federal court to use "reasonable force" to seize $63,720.80 in cash and/or assets from the Las Vegas copyright troll after Righthaven failed to pay a court judgment from August 15.
Thanks to Tom Skiba for this piece of good news. Bye bye Righthaven, good riddance, don't let the door hit you where the dog should have bit you.
Dolphin Towers in downtown Sarasota has structural problems that forced all residents out in 2010. The residents have been in a legal fight with their insurer, which has denied claims for money to repair the building. Meanwhile, the number of owners refusing to pay the assessments needed to keep up the fight and pay for repair costs at the 117-unit tower is now up to about three dozen.
What an awful situation these folks are in. And now they are fighting among themselves. Thanks to Fred Pilot for the link.
Law enforcement officials charged 13 people — including an alleged member and another associate of the Lucchese family — on racketeering and related offenses in an alleged scheme to take over and loot the Texas-based FirstPlus Financial Group Inc. (FPFG) through extortion. Ten defendants are already in custody, one is expected to surrender and two are still at large.
I wonder how the FBI was able to distinguish between organized crime and the normal course of business for the mortgage industry. If you made a Venn diagram the two circles would be one on top of the other.
Tuesday, November 01, 2011
Loans on decade-old clunkers are being bundled into securities, just as subprime mortgages were a few years ago. In the last two years, investors have bought more than $15 billion in subprime auto securities.
Although they're backed mainly by installment contracts signed by people who can't even qualify for a credit card, most of these bonds have been rated investment grade. Many have received the highest rating: AAA.
That's because rating firms believe that with tens of thousands of loans lumped together, the securities are safe even if some of the loans prove worthless.
This is not from The Onion. It's the Los Angeles Times. This is really happening. They are securitizing subprime auto loans. But don't worry--some of them are rated AAA. That means...nothing could possibly go wrong!!
Romney Tells State With Country's Highest Foreclosure Rate 'Don't Try And Stop The Foreclosure Process' | ThinkProgress
I may have posted this before, but it is worth repeating. The likely Republican presidential nominee is on record saying the government should do nothing about foreclosures. Just let them happen.
Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.
Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).
What we are experiencing is not a recession. It is a mortgage debt-driven collapse of the financial and housing industries that is far from over. Before it is finished, it will wreak havoc with state and local governments and the nation's HOAs and condo associations. Thanks to Fred Pilot for the link.
Sunday, October 30, 2011
When you drive past another vehicle with a bumper sticker that urges you to honk if you love Jesus or the Zags or any number of other potential objects of affection, you might honk if so moved.
In all cases, you are exercising your First Amendment rights. At least in Washington state.
That’s what the state Supreme Court said last week in the somewhat interesting, somewhat bizarre case of State v. Helen Immelt, a Snohomish County woman who was ticketed for honking her horn in anger at her neighbor in 2006, in a dispute over chickens.
Immelt lived in a cul-de-sac that was part of a homeowners association, although she reportedly was unaware of the association’s covenants that banned the raising of chickens. She had some chicks in her garage; her neighbor, the association president, saw them and the group sent her a letter to get rid of the birds.
She figured out the neighbor was the one who turned her in, and the next morning drove by his house around 6 a.m. and blew her horn for a period of time described in court papers as five to 10 minutes. The honked-off neighbor called the sheriff’s office, which sent out a deputy to take the complaint and happened to be there when Immelt drove by again, and honked three times more. He gave chase, pulled her over and gave her a ticket for violating the county’s noise ordinance, which bans “noise which is a public disturbance” including “sounding of vehicle horns for purposes other than public safety.”
This isn't an HOA case per se, but has its origins in a petty Privatopian dispute.